Creditors have agreed that the private equity arm of Dubai Holding, the
investment group owned by the emirate's ruler, can take longer to pay back
$2.5bn (£1.6bn) of debt.

Dubai International Capital (DIC) has been given the go-ahead by lenders including HSBC, Lloyds Banking Group and Royal Bank of Scotland to extend $2.15bn of its outstanding loans by five years, for 2pc interest.

Another $350m in loans will be extended for three years, said Dubai Holding, owned by Sheikh Mohammed bin Rashid al-Maktoum, in the deal thrashed out after nearly two years of talks.

The agreement marks part of Dubai's efforts to get its finances in order after Dubai World, another state-linked company, shocked markets in 2009 with plans to restructure $25bn of debt it had built up in its boom years.

The cost to insure Dubai's debt was unchanged after Thursday's announcement, however, as the deal had been widely expected.

"Options available to lenders were limited and deal fatigue has set in," said Ahmad Alanani at Dubai investment firm Exotix.